Do you have an internal conflict about renting out your property or staying in it and just investing in equity mutual funds? If this is your conflict, you might want to know that there are a lot of things that you would actually have to consider on the way down this investment. Both of these investment options are from completely different spectrums. The spectrums that you would not even imagine.
What could possibly be your financial stand when choosing one of them? That is exactly what we are going to talk about over here. Do not worry, as we are going to take small baby steps to understand them both in-depth and for a better tomorrow for you.
What are Equity Mutual Funds?
Now, before we get into this, you might be wondering why Equity Mutual Funds and now equity stocks. There is a reason why this is. There is a massive difference between actual shares and pooled investments of mutual funds. Shares mean you will have to be a share market expert, and the risk you hold is much more than what you would get to deal with from the mutual fund dimension. This is why it would be equity mutual funds.
Now, equity mutual funds are pooled in equity stocks by asset management companies. They are linked to the market and can fluctuate. These investments are ultimately invested in the stock market, and therefore, we can’t really predict the future, and there are chances that your investment could mostly drop in value.
But, other than that, they have a great set of returns when you look at the whole picture. Here are some of the best equity mutual funds in the market today:
- Mirae Asset Tax Saver Fund – Direct Plan
- Mirae Asset Emerging Bluechip Fund – Direct Plan
- Quant Active Fund – Direct Plan
- Canara Robeco Emerging Equities Fund – Direct Plan
- Invesco India Contra Fund – Direct Plan
- Axis Midcap Fund – Direct Plan
- IIFL Focused Equity Fund – Direct Plan
- Parag Parikh Flexi Cap Fund – Direct Plan
What is the Meaning of Rental Income?
When you own some property, it could be commercial or residential, that does not count. But, when you do, you will have the chance to rent out that property. The returns that you get each month through the rent are known as rental income.
What is the Difference Between the Two Kinds of Investments?
These are two very different investments, and you would have to look at them in-depth in order to understand the main differences between them:
They are Different Sectors of Investments
While equity mutual funds are the share market, rental income is the real estate sector. This means they are two distinct factors of investors, and it is always suggested to have a hand at both if you have the options for it.
1. Objective
Your objective is the most important aspect that you will have to consider before you start investing in either of these investment vehicles. So, where do you see yourself? If it is with a permanent investment, then you will have to choose to buy a property. If it is somewhere closer and you just want to grow some money now, you can invest in mutual funds.
2. Risk
When we talk about risk, equity mutual funds carry a higher risk factor than rental income. When you have a rental income, you know the money is going to come in. The investment is big, but it is permanent. You will make up a rental agreement with the tenant after the investment, and you will be assured of the period mentioned in the rental agreement.
There is one thing, though, all the repairs and adjustments on the property, let us call them overhead charges, will be done by you. Equity mutual funds, on the other hand, have a higher risk factor. In fact, a really high-risk factor when it is compared to rent since you would never know when the market would dip. If the market does dip, your investment will drop in price.
3. Profits
Through rental income, you know there is profit coming your way. But, if you are someone who does not already own property of any kind but needs to buy it, you might want to know that buying property is a big-time investment. There will be certain factors involved, such as the place of the property, the size, the amenities, and more, that will determine the amount of rent you get.
For equity mutual funds, however, the investments will be comparatively smaller, especially because they are mutual funds. Just as how the amount of rent would vary, the number of returns would also depend on the company you invest in and how it performs in the market. If it is a company that is performing really well, you would not have to worry about your profits.
4. Suitability
When you are going to invest in real estate, it will cost you much more. Moreover, since we are only concentrated on rental income, it can possibly take you time and expenses to find tenants. When it is mutual funds, you do not need time or any other factors; lesser money and access to the internet can get you going.
From this, we can say that if you have a huge investment amount, some time to spare, and a long-term goal, then looking forward to rental income is a great idea. But, if you are someone who is looking for short-term or mid-term investment and do not have any time to get started, then an equity mutual fund will do you justice.
Conclusion
Investments are the beginnings of brighter futures. Whether we believe it or not – it’s the only way we can beat inflation. But it all ends up with making the right choices; when you choose your investment vehicles, ensure that you choose the ones that suit you the best. The same stands in the case of choosing between rental income and equity mutual funds, so make sure you’ve chosen the one that suits you the best.
Also read: Gold Trading Vs. Equities: Why Investment in Gold is Safer
